DeJoy vows to deliver election ballots 'securely and on-time'

American Enterprise Institute Visiting Scholar, and Cornell University Professor, Rick Geddes joins Yahoo Finance’s Zack Guzman to break down the details of Postmaster General Louis DeJoy’s testimony before the House Oversight and Reform Committee on Monday.

Video Transcript

ZACK GUZMAN: A bit of a one-two punch here for Postmaster General Louis DeJoy after facing some tough questions from the GOP-led Senate Homeland Security and Governmental Affairs Committee on Friday. He's back before the House Oversight Committee today, facing some pretty pointed questions, this time from Democrats there in that committee. And he wanted to kick things off with what he says are many inaccuracies being spread out there about the changes he's making at the post office, as Democrats levy accusations of interfering with the election in November by scaling back operations there that might interfere with mail-in ballots. Here's what he had to say to kick things off at the testimony. Take a listen.

LOUIS DEJOY: First, I did not direct the removal of blue collection boxes or the removal of mail processing equipment. Second, I did not direct the cutback on hours at any of our postal-- post offices. And finally, I did not direct the elimination or any cutback in overtime. I did, however, suspend these practices to remove any misperceptions about our commitment to delivering the nation's election mail. Any further assertions by the media or elected officials is furthering a false narrative to the American people.

ZACK GUZMAN: All right, there you go. There's the latest there from Postmaster General DeJoy. And for more on this, we're joined now by Rick Geddes, American Enterprise Institute visiting scholar and Cornell University professor in the Department of Policy Analysis and Management. And Rick, I mean, you just heard his defense there. We are, of course, in the thrust of what President Trump himself and the task force looking into it has highlighted before, and the true fact that the USPS loses billions of dollars a year. But I guess there's a political lens to look through, as this is an election year. What do you make of his defense that we just heard there?

RICK GEDDES: Yeah, so Zack, I think it's a great question. I think it's important to view it through the lens of the economics of the postal service. You know, and just briefly, I mean, the postal services has been in a serious fiscal bind for a long, long time. You know, their core business is the delivery of first-class documents. You know, that's mainly cards and letters. And that business actually peaked in 2001, Zack. And it's declined by about 47%, so almost half, since then. You know, and we all kind of know why, which is increases in electronic communications. You know, cell phones and texting, email, et cetera. You know, it's shifted more into parcel delivery. But first-class was really, historically, its most profitable class.

But it has to keep up what we call the universal service obligation, which is delivery to basically every address in the United States six days a week. So there's this high fixed cost network that they have to maintain to meet the universal service obligation. In the face of those declining revenues, Zack, basically all you can do is, you know, cut things on the margins, while trying to avoid layoffs. So the idea is, you know, non-layoff cost-cutting. So the things that the postmaster general is talking about, those blue collection boxes we're all talking about, those have been reduced for the past 10 years. So there's a long-term plan of the postal service to reduce those non-labor costs.

ZACK GUZMAN: Yeah, and I mean, when we're talking about that, that probably would be fine if those were implemented in anything but an election year. And in not just an election year, but one in which more voters are going to be turning to mail-in ballots, when you think about the pandemic still ongoing here, and trying to be safe through all that. But it was interesting to hear his response in a line of questioning, where he basically retorted and said, am I the only one in this room that understands that we have a $10 billion a year loss, in talking about some of those cost-cutting measures that seemingly can't be delayed all that much. I guess how do you grapple with those things when you consider that this loss has been occurring for so long, but also, I guess, the optics of trying to get these things implemented right now before the election?

RICK GEDDES: Yeah, so Zack, I think the optics are bad. I mean, you know, I've been studying the postal service since the early '90s in terms of postal policy, and I've never seen the postal service, you know, in the public eye to the degree that it is now. So I think, you know-- and of course, the pandemic has heightened the interest in mail-in ballots, for obvious reasons. You know, so I think everything is kind of being interpreted through a political lens, just about every postal policy that normally-- you know, in terms of getting rid of old sorting machines or the blue collection boxes and other things to cut costs without layoffs, you know, we normally wouldn't pay much attention to it.

And the postal service's been losing, you know, billions of dollars a year for a long time, basically since the 2006 act that restructured the postal service, which we can talk about. But now, I think everything, because of the mail-in ballot issue, has become, you know, much more heightened and is viewed politically, when my sense is that the postal service senior management makes these decisions months or perhaps years in advance. And they know decline-- there's a decline in volume of mail, and they know their fiscal situation quite well, so they know they have to cut costs. So they're looking forward to how they can cut those sort of non-labor costs out, Zack. But I think the optics of it have created a problem.

ZACK GUZMAN: Well, no, I think it's right to step back, and you know, and it's great to have a guest like you on, who has been studying this, as you said, since the '90s, and could back up to that legislation, the Postal Accountability and Enhancement Act, the PAEA back in 2006 that kind of set this up, put them in a bind from the get-go, when you think about having to establish and maintain the universal service requirement there of getting mail out to US addresses six days a week, but also, as you said, dealing with the shift away from its traditional profitable side of the business, and how you do that as you continue to see that side of the business deteriorate here. So what would you do if you are Postmaster General DeJoy here, and trying to structure this to create the turnaround task force that President Trump instituted and publish those results back in 2018? What would you say is the right thing to do now to try and fix this? What do you want to see change?

RICK GEDDES: Yeah, so Zack, that's a great question. And here, we don't have to speculate. All we have to do is look to most other developed economies, which have already reformed their posts. In fact, the entire European Union, I think at the time 27 member countries, liberalized their posts, meaning they gave postal management much more commercial freedom. So liberalization means deregulation, making it run more like a business. And people should realize the act that created the postal service, the Postal Reorganization Act of 1970, requested, mandated that the postal service be operate-- operate like a business.

So we should take it to the next step. That's deregulating, giving postal management more control over managerial decisions, as opposed to Congress, but also figuring out exactly how we should define the USO. Does it still have to be six days per week, in light of the changes in the communication marketplace? Could we have delivery Monday, Wednesday and Friday?

But the second step, Zack, is then for Congress to compensate the postal service, because obviously delivering to a lot of rural routes is not always profitable. That's fine. But just have a line item where you pay the postal service, and then give the postal service this commercial freedom. And you know, we call that liberalizing. And we can talk about the gory details of what would be involved, but we basically just need to look to Europe for that.